AGED CARE REFORMS What you need to know!

Significant reforms are planned for Aged Care from 1 July 2014.

Understanding the changes and how they may impact

your cost of care, eligibility for pension and estate

planning wishes can help you make informed decisions.

How to contact us

Additional informationFor access to: – online retirement and aged care directories, – the Aged Care Gurus Adviser network, – the latest Department of Health and Ageing Fees and Charges, and – Centrelink Pension rates, go to:

http://www.agedcaregurus.net.au

24A Darlot Street, Horsham

To talk over the best way forward, call Ashley Rowan today03 5382 3460

or emailashley@meritumfg.com.au

or visit our websitewww.meritumfg.com.au

or meet for your free no-obligation appointment24A Darlot Street, Horsham Vic 3400

DisclaimerThe information in this document reflects Meritum Financial Group’s understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person and it is not a substitute for professional advice. Before making an investment decision on the basis of the information above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the information is appropriate in the light of their particular investment needs, objectives and financial circumstances.

Meritum Financial Group – Robert Goudie Financial Advisers Partnership ABN 39 452 922 473Australian Financial Services Licence Number: 24556924A Darlot Street, Horsham VIC 3400PO Box 42, Horsham Vic 3402Telephone: (03) 5382 3460 Facsimile: (03) 5381 1347Website: www.meritumfg.com.au

Post 1 July your ability to contribute towards the cost of a Home Care Package will be assessed by the government based on your income. If your assessable income exceeds $22,701 p.a (single) or $35,210 p.a (couple) you will need to contribute towards your home care package at the rate of 50c per dollar above these thresholds.

Full pensioners will not be liable for a care contribution, part pensioners will contribute up to $5,000p.a while self-funded retirees will contribute up to $10,000p.a.

All Home Care Package recipients will continue to pay the basic contribution, calculated at 17.5% of the pension (as at 20 September 2013 $9.39 p.d.).

Full Pensioners and equivalent($22,701single,$35,210 couple)basic fee (17.5% pension) + no care contribution

Part Pensioners and equivalent($43,186 single, $66,092 couple)basic fee + care contribution

Self - Funded retirees and equivalentbasic fee + care contribution

A lifetime limit of $60,000 applies to the care contribution across all forms of care.

Means Testing of Home Care Packages

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People with assets below $40,500 and income below $22,701 p.a. will not make a contribution towards their accommodation cost, they will be considered Fully Supported Residents. People with assets above $40,500 and income above $22,701 p.a. will have the ability to be supported assessed based on the outcome of the two tests.

For example, someone with income of $23,500p.a and assets of $90,000 would have their ability to contribute as follows:The income contribution at 50c for each dollar above $22,701 = $399.50The asset contribution at 17.5% of assets above $40,500 = $8,662.50Gives an accommodation contribution of $24.90 p.d.

Seeking AdviceAged Care decisions are complex and specialist advice is needed. The correct structuring of your assets and income can ensure that you maximise your pension entitlement, minimise the ongoing cost of aged care and have your estate planning wishes met.

If you are considering the move to aged care, understanding the impact of moving into aged care prior to or after 1 July is crucial.

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Accommodation PaymentsAt present the way someone pays for their accommodation in an aged care facility is determined by the type of care they receive: if they live in low care or extra services the payment is an accommodation bond, if they live in high care they pay a daily charge (the accommodation charge).

Post 1 July 2014 residents will be able to choose to pay for their cost of accommodation through a Lump Sum (known as a Refundable Accommodation Deposit or RAD), a Daily Charge (known as a Daily Accommodation Payment or DAP) or a combination of the two.

Fees and Charges Choices post 1 July 2014= RAD + Basic Daily Care Fee + Care Contributionor DAPor Combination of RAD and DAP

Accommodation payments will be subject to a market price model and aged care facilities will need to publish the market price of their accommodation payments on their website, the My Aged Care website and in their brochures.

Market price RAD’s in excess of $550,000 will need to be approved by the Aged Care Pricing Commissioner.

The Daily Accommodation Payment is calculated from the Refundable Accommodation Deposit amount at a government set interest rate, at the moment that is 6.6%.

Residential Aged Care

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The formula that is applied is:50c per dollar of income above $22,701p.a plus17.5% of assets between $40,500 and $144,500 plus1% of assets between $144,500 - $353,500 plus2% of asset above $353,500

Income is assessed under the same rules that Centrelink applies for pension entitlement. Assets, both within Australia and overseas, are assessed at market value.

The former home will be assessed at a value of $144,500 unless a protected person is living there, in which case it is exempt from the assessment.

A protected person is:– A spouse or dependent child– A carer, who is eligible to receive an Australian Income Support Payment, who has been living there for at least 2 years– A close relative, who is eligible to receive an Australian Income Support Payment, who has been living there for at least 5 years

Supported ResidentsA common misconception about moving into an aged care facility is “If I don’t have any money, I won’t get in!”. In reality, most aged care facilities need to keep a ratio of people who are financially disadvantaged to receive funding from the government, the exception is extra services facilities.

At the moment an asset test is used to determine if you qualify to be a supported resident. Post 1 July, 2014 your eligibility to have some (or all) of your cost of accommodation subsidised by the government will be based on your assets and your income.

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For example, if the market price RAD was $350,000, the DAP would be $63.46 per day. Of course you may decide to pay $200,000 by RAD and $150,000 by DAP in which case the DAP would be $27.20 per day.

Any amount of RAD you pay will be an exempt asset for the calculation of your pension entitlement. However, payment of a RAD will be included in the calculation of assets for your care contribution.

Care PaymentsThe Basic Daily Care Fee, set at 85% of the Age Pension, will continue to apply to all residents of an aged care facility.

Currently, an income test is used to determine someone’s ability to contribute above the basic fee towards their cost of care. The income tested fee is levied at 41.67c per dollar of income above a threshold and is capped at the cost of care or the daily limit.

Post reform residents of an aged care facility will be assessed by the government based on their assets and their income to determine their capacity to pay beyond the basic fee.

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